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US Manufacturers Pushed Back On Broad Import Restrictions

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Trump is waiting to finished up healthcare, taxes, and infrastructure before deciding on steel trade policy.

It was questionable why the administration chose to start a Section 232 investigation on steel imports.

Section 232 allows the issue to be framed broadly, paving the way for broad restrictions on steel imports.

United States steel producers and consumers, not to mention international trade wonks, have been waiting with bated breath for the release of the Commerce Department’s report on its Section 232 investigation of steel imports. The report would have come in the form of a policy recommendation addressed to President Donald Trump.

This week we received a glimpse of the timetable of a new US policy on steel imports: maybe never.

Trump told the Wall Street Journal a few days ago that “we don’t want to do it at this moment” and that he was “waiting till we get everything finished up between healthcare and taxes and maybe even infrastructure” before he makes a decision on steel trade policy. Given how the president’s agenda is proceeding through Congress, that day, as Don Corleone once said, may never come.

In early April, Commerce started the Section 232 investigation, focusing on whether steel imports represent a threat to national security. A couple of weeks later, Trump followed up with an executive order directing Commerce to complete the investigation within 50 days rather than the 270 specified in US legislation.

That would have meant completing the investigation towards the end of June, just as the president was heading to Europe for the G20 summit. News reports at that time indicated Trump was postponing the release of the report until after the G20. Members of Congress in early July were quoted as saying they expected the report to be released within the week.

Why the delay? One reason could be the pushback the administration received from US businesses that depend on steel imports.

It was questionable why the administration chose to start a Section 232 investigation, since complaints regarding steel imports are primarily commercial, relating to overcapacity and dumping, causing damage to the domestic steel industry. (Actually, US steel producers aren’t doing that bad. More on that in an upcoming article.) One possible answer is that Section 232 allows the issue to be framed broadly, paving the way for the president to impose restrictions on broad swaths of steel imports, if not all of them.

That’s not as far fetched as it sounds. Although Commerce normally investigates and applies punitive duties on narrow categories of products from specific locations, at public hearings conducted by Commerce in May, Secretary of Commerce Wilbur Ross articulated the issue in sweeping terms.

Ross described the investigation as “an evaluation of the current state of the US steel industry, as well as current imports of steel products and raw materials. The purpose of the investigation is to determine if the steel being imported into this country impairs our national economic and military security.” The oversized scope of the investigation would suggest a broad remedy.

But Ross—and maybe even the president—soon learned that the issue is more nuanced than they might have wished. For example, what is the definition of national security, and how do steel imports impact it? American Iron and Steel Institute statistics show that just three percent of total US domestic steel shipments go to national defense and homeland security.

Is it reasonable to sanction imports of the many dozens of imported steel products and from all locations? The US imports steel from over 100 countries; Canada is the largest source of imported steel.

What about the effect clamping down on steel imports would have on US manufacturers who rely on them?

US manufacturers pushed back on the notion that restricting all steel imports could be justified. CSN LLC, an Indiana-based manufacturer of flat-rolled steel products, “strongly opposes additional restrictions on imports of steel for national security purposes.” “We believe such action is both unwarranted on national security grounds and would damage the interests of US manufacturers,” the company said, in written comments addressed to Ross. “Restricting imports of steel will likely cause economic damage to downstream consuming industries that are vital to national defense and the broader economy.”

NSCI, an Indiana-based company, imports wire rod from Japan to produce steel wire for fasteners and auto parts in the US. “The quality of this wire rod produced by the Japanese manufacturers is unavailable in the United States,” said Tim Johns, the company’s vice president of manufacturing, at the public hearing. “If NSCI is not able to import these materials, the company will be forced to shut down…”

Likewise, Joel Johnson, CEO of Borusan Mannesmann Pipe USA, in Baytown, Texas, said the company requires imports from Turkey to produce tubular goods for oil and gas wells. “These imports allow us to be fully competitive in the US market and enhance the volume of our domestic production,” he noted. “Expanding domestic energy production and increasing America’s energy independence has obvious national security implications.”

So does the possibility of retaliation against import restrictions Trump may impose. “The most obvious target for retaliation is US arms exports,” said Gary Horlick, a law professor who appeared at the public hearing on behalf of American Institute for International Steel. The economics of US defense production depends on foreign sales, Horlick argued. “Without the foreign sales…the costs of the planes goes up,” he said.

The same goes for US agriculture exports. “If you’re looking at the national security of the US,” said Horlick, “please include food.”

Who knew regulating steel imports could be so complicated? The Trump administration now hopefully has a better idea. While Trump’s protectionist rhetoric may have struck a chord on the campaign trail, it doesn’t have much place in actual governing.